The largest port on the East Coast began preparations for an attack

Port of New York/New Jersey executives told CNBC they have begun preparations for a potential full work stoppage by the International Longshoreman Association, North America’s largest labor union. The ILA represents over 85,000 longshoremen and the strike will shut down five of the 10 busiest ports in North America, and a total of 36 ports along the East and Gulf Coasts, on October 1. Between 43%-49% of all US imports and billions of dollars in monthly trade in the stock as the union approaches the October 1 deadline for a new contract. Cruise operations will continue.

Talks with port ownership broke down over the summer and it remains unclear how much progress, if any, has been made. The ILA rank and file recently voted unanimously to authorize a strike and the group that represents port management, the United States Maritime Alliance, recently announced that the union had made the decision to strike.

Beth Rooney, director of the Port Authority of New York and New Jersey, told CNBC on Thursday that ocean carriers and terminal operators announced they were streamlining operations to avoid stacking containers. The Port of New York/New Jersey has engaged in discussions with ocean carriers and terminal operators on managing the cargo disruptions, to ensure appropriate measures are taken to complete the movement of cargo from the terminal before the shutdown.

“Some ocean carriers have announced plans to embargo export cargo coming to the East Coast from the Midwest,” Rooney said. “So the further the cargo can come to us from the interior, the sooner it will be embargoed,” he said. “If there is a strike and operations stop, the boat will wait in a designated area or slow steam as it was done during Covid to delay its arrival. entering the port.”

In a recent blog post, Jim Mancini, CH RobinsonThe vice president of North American Surface Transportation wrote that not only US companies and suppliers will be affected, but also supply chains in Europe, Oceania, Latin America, and Asia.

“While the APAC region usually has more options for moving goods to the West Coast, more than half of the automotive goods arriving today are very dependent on the East Coast. For example, the German corridor to Charleston and Savannah is very important for European car manufacturers. It will be closed if there is As of today, there are only two container service loops operating between Europe and the US West Coast.

The Biden administration said it would not seek the power under the Taft-Hartley Act to force union members back to work, as CNBC reported, and urged the parties to return to the bargaining table. “We have never called on Taft-Hartley to undermine the attack and don’t think so now,” a Biden administration spokeswoman told CNBC on September 4.

ILA President Harold Daggett recently warned at a union meeting that members being forced back to work on purpose would slow things down. This will only add to the stack of containers that paralyze the fluidity of the supply chain.

The Port of New York/New Jersey has joined other ports that have publicly posted attack contingency plans.

The Port of Houston, for example, has published a strike preparation guide for its customers. The port indicated it could extend gate hours during the week of September 23, if necessary. It is also planning to open the gates on Friday, September 28, subject to confirmation early next week.

Ships scheduled to enter East and Gulf Coast ports have been crossing the ocean since early to mid-August.

In an advisory to clients, the Georgia Ports Authority recommended delivery of imports “before October 1 to minimize disruption,” adding that it would offer weekend gates to support this effort. On exports, the port explained that refrigerated and non-refrigerated containers will be accepted until September 30.

The contingency plan is the result of a stalemate between the International Longshoremen Association’s six-year contract with the United States Maritime Alliance. Both are far from wages and automation. The ILA announced on June 10 the suspension of negotiations on the use of automatic gate systems in Mobile, Alabama and other ports.

Logistics experts told CNBC that in recent months, there has been an exodus of cargo from the East to the West Coast in anticipation of a possible attack.

In anticipation of additional cargo, Port of Long Beach CEO Mario Cordero said it is equipped to handle increased cargo in the event of a labor strike at the East and Gulf Coast ports. August was the port’s strongest month in its 113-year history, with imports up 40.4% year-on-year and exports up 12% YOY.

“Our terminal operators are also prepared to adjust gate hours if necessary and our overflow site, the Short Term Overflow Resource yard (STOR) facility at Pier S – is open and has available capacity,” COO Noel Hacegaba said at a press conference.

In recent comments to rank-and-file union members, Daggett also called for the last ILA strike, in 1977, when Daggett was among ILA members who traveled to the West Coast for a 44-day strike to ensure that West Coast dockworkers supported its efforts.

The executive director of the Port of Los Angeles Gene Seroka told CNBC, “I’m sure Harold (Daggett) has to say and I don’t have any evidence right now about cargo ships turning left that normally go to the East, Gulf Coast port and come here for West or specifically Los Angeles. There have been the decades-long tradition among labor organizations that one would not take advantage of another’s collective bargaining process, and to be fair, this has not happened since the 70s. I don’t see it happening again here.”

The ILA did not respond to a request for comment.

The Port of Los Angeles reported 960,597 twenty-foot equivalent units (TEU) in August, an increase of 16% compared to the previous year. The month was the port’s busiest non-pandemic month. The Port of Los Angeles is 17% faster than 2023, having moved almost one million more containers than last year, with only eight months until 2024.

Fear of supply chain bottlenecks

Congestion levels have been predicted by the maritime industry. Sea-Intelligence had estimated that a one-day attack by the ILA would take five days to clear. A one-week strike in October could lead to a slowdown until mid-November. Two weeks will take you to January due to ship congestion and container reserves.

Fears of a strike by labor unions pushed back the peak season earlier this month as shippers wanted to make sure holiday products would be there before they stopped work.

Based on Xeneta data, East Coast labor has seen a nearly 2% decrease in import tonnage processed between Q4 2023 and Q2 2024.

The East Coast’s share of total container imports to the US from the Far East decreased from 34.4% in Q4 2023 to 32.6% in Q2 2024. Meanwhile, the West Coast’s share increased from 57.7% in Q4 2023 to 60% in Q2 2024 (the rest of the container is imported via the US Gulf Coast).

The diversion of trade affected ILA workers as they earned royalties on the number of containers moved.

A Miter analysis commissioned by the US Chamber of Commerce estimated that the 30-day strike was centered on the port. of New York and New Jersey could cause an economic impact of up to $641 million per day. In Virginia, an economic impact of $600 million per day is predicted, or about $18 billion over 30 days. The export impact on the Houston operation could reach $51 million per day, and $41.5 million per day for imports.

The transportation company told CNBC that it continues to divert containers. Seko Logistics moved some clients to the West Coast, and moved containers to the east via transloading from the West Coast to help alleviate some of the congestion.

A CSX spokesperson told CNBC, “We are monitoring the situation closely and will proactively communicate with our customers regarding any necessary operational actions.”

Goetz Alebrand, Head of Ocean Freight Americas at DHL Global Forwarding, told CNBC that the diversification of client routes and also transloading. “We also use skin stacks to manage the flow of containers,” Alebrand said. “We are aware of the backlog caused by the limited supply of rail cars on certain lines and our team is actively working to explore additional rail and truck options to reduce disruption.”

Air freight, although more expensive, is also an alternative for time-sensitive or high-value items.

Paul Brashier, vice president of global supply chain at ITS Logistics, told CNBC that it has implemented post-Covid and 2018 tariff contingency operations.

“We have repositioned truck chassis and grouped trucks in the Southeast, Gulf, and Mid-Atlantic regions to expand the movement of goods in the port that has been completed hours. We then put containers in the yard we have expanded for later delivery.”